Springfield City Council Considers New Rules for Missouri Payday Loans
Inside Subprime: April 29, 2019
By Lindsay Frankel
At a recent hearing of the Springfield, Missouri City Council, consumer advocates and faith groups rallied for lawmakers to approve proposed legislation that would impose new regulations for payday loans.
Rev. Colin Douglas told the rallying crowd that the debt trap caused by payday loans is “one of the deepest problems we have here in Springfield, a problem that contributes to poverty, systemic racism, as well as the corrupt moral narrative.”
But some argued that the new rules wouldn’t do enough to protect consumers, since curbing interest rates is the responsibility of state lawmakers.
“I fail to see how passing this bill will change anything,” said Mayor Ken McClure in part. “This will not correct the problem …”
The City Council could approve one of two versions of the proposal in May, both of which would require payday loans and title loans to undergo a background check, post a notice clarifying the interest rates charged, and educate consumers about alternative options. The original proposal would also require that payday and title loan firms pay a $5,000 annual license fee if approved by voters.
Missouri payday loans are even more costly than in other states due to permissive laws governing interest rates. Borrowers pay an average annual interest rate of 455 percent, according to data from Pew Charitable Trusts. And a recent study found that the financial stress caused by payday loan fees is also a health risk for Missouri residents, with focus group participants citing both physical and mental health problems as a result of borrowing.
Councilman Matthew Simpson said he hoped the state would do more to limit interest rates. “My personal opinion is they are obscene and predatory and I hope the state legislature will regulate them,” Simpson said. “To me, the most valuable part of this is the information and providing access to potential alternatives to these lenders.” The ordinance would require payday lenders to give out city-approved guides of payday loan alternatives to patrons, potentially steering them away from the dangerous loans.
Some residents shared personal stories about how payday loans had negatively impacted the financial well-being of their families. Barbara Burgess spoke of the devastating downward spiral that can start with taking out a Missouri title loan: “This vicious cycle just continues. If I don’t make the car payment, I lose the car. If I lose my car, I lose my job. If I lose my job, I’m going to lose my house,” she said.
Edna Smith, a volunteer at a women’s homeless shelter, told the council that she’d seen payday loans contribute to homelessness. And while she acknowledged that the proposed ordinance wouldn’t protect Springfield residents from high interest rates, she also said, “…we have to do something.”
Learn more about payday loans, scams, and cash advances, and check out our city and state financial guides, including Missouri, Columbia, Independence, Jefferson City, Joplin, Kansas City, Springfield, St. Louis, Illinois, Chicago, Texas and more.